If you’ve ever thought that paper money and coins were things of the past, you’re not alone. Currency has evolved over the years, but never so rapidly as in modern times. Thanks to the popularity of online shopping, digital payments are soaring worldwide. Most people use cards, smartphones, or smartwatches to pay for things in-store, as contactless payments have become the new normal.
For providers of online payment systems, the challenge is to show value beyond the ease of transitions while keeping up with technology and building trust with consumers that digital payments are quick, easy, and safe.
There are also global policy changes to consider, as many banks prioritize promoting digital payments and broadening remote access to accounts and services.
In 2022, all the available data indicated that we are heading toward becoming a cashless society. While COVID expedited this process, it may have also stopped us from asking one essential question: do we really want to be a cashless society?
A cashless society is one in which debit and credit cards, online payment services, or digital currencies are preferred, and paper money and coins are no longer accepted. While we are getting close, no country in the world can be considered cashless. In 2017, only 20 percent of transactions in Sweden were cash. China has created its own digital currency, and in 2019, Saudi Arabia set a goal for 70 percent of all transactions to be digital by 2030.
What are the benefits of a cashless society? In addition to being convenient, going cashless may reduce violent crime, theft, tax evasion, and fraud. Research indicates that less cash equals less crime, and as we saw during the pandemic, handling money can spread contagious diseases like COVID, MRSA, and salmonella.
Digital payments also eliminate many of the costs associated with handling money. It’s easier for people to budget and makes spending buying from global stores and vendors seamless.
However, there are some downsides, and most revolve around privacy concerns. Digital currency is ripe for hackers, and many problems can arise when you rely on the internet and other technology to pay for everything. Cyberattacks are likely to increase drastically, and there are many questions to be answered about what going cashless will mean for certain members of society, including the elderly, undocumented, and homeless.
But there’s no reason to panic. As we head closer to becoming a cashless society, policymakers and leaders in all sectors will work harder to determine how to grow and change to fit the new system. Society dealt with a similar shift when banks evolved from merchant-based institutions.
The wheels are already in motion, and the truth is that there is little we can do to stop what is inevitable. We should focus on the transition period to ensure we create a fair system that’s safe from threats, including hacking and natural disasters. We must be diligent that a cashless system doesn’t exclude certain people in society, so everyone is on board with the change.
Any opinions are those of Thomas Fleishel and not necessarily those of Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.